Local Government Finance (Wales)

§ The Secretary of State for Wales (Mr. William Hague)

I beg to move, That the Local Government Finance Report (Wales) 1997–98 (HC 218), which was laid before this House on 3rd February, be approved.

§ Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

I understand that with this, it will be convenient to discuss the following motions: That the Special Grant Report (Wales) 1997 (HC 219), which was laid before this House on 3rd February, be approved. That the Limitation of Council Tax (Relevant Notional Amounts) Report (Wales) 1997–98 (HC 220), which was laid before this House on 3rd February, be approved.

§ Mr. Hague

These motions concern provision for local authority revenue spending in Wales in the financial year beginning in April 1997.

In summary, I propose to set the total standard spending of Welsh local authorities at £2,931.3 million. That is an increase of £66.3 million, or 2.3 per cent., over the current year—slightly more than the forecast rate of inflation. Total standard spending includes £340 million for the four Welsh police authorities, £2,515 million in standard spending assessments for the 22 unitary authorities, and £73 million in specific grant such as national park grant and magistrates court grant.

Under my provisional capping criteria, every local authority in Wales can, if it sees fit, increase its budget in comparison with its previous notional amount by at least 3.7 per cent.

My plans for total standard spending increase the advantage that Welsh local government has over its English counterparts. Welsh TSS represents more than £1,000 of expenditure for every man, woman and child in Wales. It is an increase of £20 per head on the current year, and £70 per head higher than the equivalent figure for England.

That is a good settlement, and I look forward to Labour Members' support for it. They recently announced that they agree with and accept the Government's overall spending plans for the next two years. As the hon. Member for Caerphilly (Mr. Davies) said, quoted in the Western Mail of 21 January: Labour will accept the spending plans for the first two years as they stand. This applies across the board and therefore to Wales. It would be churlish of me not to welcome that statement of support for my budgetary plans, even though Labour Members had previously denounced them. The hon. Member for Caerphilly will no doubt wish to clarify tonight whether that commitment applies to the local government settlement, and, if not, what other Welsh spending would be reduced in order to increase it.

Hon. Members on both sides of the House will also be pleased that the vast majority of local government spending in Wales will continue to be provided from central Government funds. I propose to provide £2,577.9 million in central Government support through aggregate external finance in support of total standard spending. That is an increase of £64.3 million—or 2.6 per cent.—on the current year, about 1 per cent. 859 higher than the increase for England. It amounts to £880 per person, an increase of £20 on the current year, and a massive £150 per head more than the level of support provided in England.

Aggregate external finance will comprise £1,732.7 million in revenue support grant, £584 million in distributable non-domestic rates, £244.5 million in specific grants—including police grants to be paid by the Home Secretary—and £16.7 million for council tax damping measures.

My decisions about aggregate external finance clearly confound the view expressed by some people last year that Welsh council taxes would rise rapidly to English levels. My plans will ensure that, on average, Welsh council tax increases should be no higher than those in England, and that average Welsh council tax levels should be about £200 lower than in England.

I remain of the view that, over the longer term, local government should raise a greater proportion of its income from the local taxpayer—it is difficult to understand how anyone who believes in local accountability can hold a different view. However, I have always made it clear that I would take my decisions, year by year, on the merits of the case, and for the coming year I have decided to hold aggregate external finance at about 88 per cent. of total standard spending. That compares with the much lower figure of 79 per cent. in England.

In addition, I expect to fund 100 per cent. of mandatory local government reorganisation costs and a proportion of discretionary costs in the coming year, amounting to a total of £10.1 million. Overall, the provision that we have made for transitional costs arising from local government reorganisation will amount to £104 million over the five-year period ending in 1999.

§ Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

The right hon. Gentleman makes a serious point about the way in which central Government increasingly carries the burden of local spending, so that any marginal change in central Government decisions has a disproportionate effect on taxation at local level. That has happened this year and last year. Is not the problem that we have never managed to devise an effective system of local government taxation?

§ Mr. Hague

The hon. Gentleman makes a valid point. We have not succeeded in devising a form of local government taxation that would allow local government to raise the vast majority—or all—of its revenue and take all that responsibility. That is why we continue to provide a very large proportion of local government spending from central Government funds. It does not mean that we cannot adjust that amount, but it means that, for a long time to come, unless the basis of local taxation is changed, most of the money will be provided from central Government funds.

§ Mr. Christopher Gill (Ludlow)

Has my right hon. Friend considered that the only way that we shall put this equation right, so that local government is totally accountable for its expenditure, is to remove the cost of education and social services from the local authority, and assume it as a national responsibility? If we did so, local 860 spending could be almost 100 per cent. funded by the council tax, ensuring greater accountability, greater intelligibility to the electorate and more satisfactory local democracy.

§ Mr. Hague

In theory, one way to change the equation would be to reduce the total amount and shift responsibility elsewhere. As my hon. Friend knows, we have moved much responsibility for education budgets into schools, and I prefer to think that our future progress will involve greater devolution to local decision making instead of centralisation of decision making. However, Governments of all parties have tried to reform the present system, and have not enjoyed the experience. I believe that, within the existing system, the decisions that I am announcing for the coming year are right.

The standard spending assessment specified in the "Local Government Finance Report (Wales) 1997–98", which is before the House, have been calculated in accordance with a formula agreed with the Welsh Local Government Association. It was developed over a two-year period by the Welsh Office and the local government associations, and comprises objective, largely population-based, indicators of relevant need.

That said, I want to explore all avenues for improving the formula. It is subject to a full review being undertaken jointly by the Welsh Office and the Welsh Local Government Association, which will be completed in time for the 1998–99 settlement. I welcome the fact that local authority elected members are participating in the review working groups. Pending its completion, the Welsh Consultative Council on Local Government Finance agreed that no significant change should be made to the formula for the coming year. The consultative council will consider the review recommendations in the autumn.

§ Sir Wyn Roberts (Conwy)

It is all very well for the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) to look a gift horse in the mouth when he refers to the 88 per cent. that my right hon. Friend has secured, compared with the 79 per cent. in England, but does my right hon. Friend agree that the real threat to the favourable treatment that Wales receives is from the Opposition's devolution proposals?

§ Mr. Hague

My right hon. Friend makes two valid points. He draws attention to the advantage that Wales enjoys in local government finance, which we have preserved over many years, with a much larger proportion of local authority spending financed from central Government funds. He is right to say that the threat to the formula which determines the spending of the entire Welsh block, on which these figures critically depend, is a fundamental change in our constitutional arrangements, which could sweep that formula away.

Local authorities are responsible for setting budgets and determining their council tax. In setting budgets, they will need to take account of the effect of their spending decisions on council tax payers.

§ Mr. Walter Sweeney (Vale of Glamorgan)

I assume that the aggregate external finance figures that my right hon. Friend has given include the provision from central funds for the police and the amount that comes from the Home Secretary. Will my right hon. Friend clarify 861 whether the figures he gave include the additional funds promised by the Home Secretary to fund additional policing?

§ Mr. Hague

The specific grants, which include £171.1 million in police grant to be paid by the Home Secretary, are included in my figures for aggregate external finance, and that is the total provision from the Home Office for the police in the coming year. It therefore includes all policy initiatives, which my hon. Friend will have heard the Home Secretary announce, and which are now being implemented.

The provisional capping principles that I announced on 12 December enable me to restrain spending by local authorities, if necessary. However, provisional capping limits are ceilings, not targets, and it is open to local authorities to set budgets below their capping limits.

I have taken careful account of representations made to me about potential council tax increases, should authorities exercise their discretion to budget at cap, so I decided to continue for a further year the targeted council tax damping scheme that I introduced for last year. I am making £16.5 million available within AEF to ensure that, excluding any increase in community council precepts and discretionary non-domestic rate relief, no council tax increase can exceed 15 per cent. The great majority of council tax increases will have to be well below that level, and council tax payers in nine of the 22 unitary authority areas will benefit from the scheme.

§ Mr. Donald Anderson (Swansea, East)

The capping limit in Wales is 1.8 per cent., whereas in England it is 2.6 per cent. What is the logic behind the difference?

§ Mr. Hague

The capping limit in England is much more complex. It is 2.6 per cent. for certain types of authority but a lower limit for other types of authority. It varies in England because of the introduction of unitary authorities, and because of a different pattern of local government reorganisation from what we have seen in Wales. If one were to allow for all those differences, the hon. Gentleman would find that capping limits are not as generous in England as they are in Wales. I should be happy to write to him with those figures.

§ Mr. Denzil Davies (Llanelli)

The Minister said that, in an ideal world, he would like to see an increase in local democracy, and more money raised locally. We would all agree with that, although we realise the difficulties. Why, then, does he have capping at all? Why not just put the capping aside and allow local democracy to take its course?

§ Mr. Hague

As we discussed earlier, we do not have a system in which local authorities take true responsibility for all their decisions. I am interested to hear Labour Members advocate the lifting of all capping restrictions, because it is one of those murky areas of policy that the Labour party has developed over the past year or two. Previously, it was in favour of abolishing all capping limits; now it seems to be in favour of capping limits for the coming year, if I understand the hon. Member for Holborn and St. Pancras (Mr. Dobson) correctly. I expect that the hon. Member for Caerphilly will enlarge on that in his speech.

862 My answer to the right hon. Member for Llanelli (Mr. Davies) is that the consequences for Welsh council tax payers would be unacceptable if local authorities were left to set the council tax themselves.

There is good news on the local authority front, which Opposition Members and others outside the House often do not care to recognise. Local government reorganisation has worked well, as the Welsh Local Government Association acknowledges. Only last week, Her Majesty's chief inspector of schools in Wales reported a significant and continuing improvement in standards in our schools. Local authorities are playing a full part in attracting inward investment. I am happy to pay tribute to those who have helped to secure some of our recent projects.

Local authorities have increased access to private sector resources for capital investment under the private finance initiative, and a significant number are pressing ahead with schemes. They are beginning to realise that they do not have to depend on central Government capital allocations.

There are a number of ways in which local authorities can take action to help themselves, particularly through the levering in of private finance. Much more can be achieved by innovative partnerships between local authorities and the private sector. That has for a long time been the case with regeneration projects, but now the opportunities extend to a wide field of mainstream service delivery.

Under our PFI, major and radical changes have been made to the capital finance rules over the past two years, which, coupled with new arrangements for revenue support which are not constrained by the normal capping rules, have given local authorities the tools to go about providing services and facilities such as schools, roads, libraries and leisure facilities in radically new ways. Again, I pay tribute to those authorities that are looking seriously at private finance options.

Local authorities should also consider the opportunities for transferring their housing stock, with the consent of their tenants, to a local housing company or an existing housing association. That allows borrowing for improvements in the housing stock outside PSBR constraints, and, depending on the valuation of the stock, it can also generate a usable capital receipt for the authority. Where stock transfers at a positive value, concessions agreed at the time of the budget make the receipt position more favourable than under previous rules.

I am therefore pleased that a number of Welsh authorities are actively considering stock transfer, and I urge all authorities to do so. Experience in England amply demonstrates the benefits to councils and their tenants. Stock transfer should be regarded not simply as a means of dealing with the problems of individual estates, but as a strategic choice for long-term investment in the housing stock. I wish that, instead of decrying as inadequate the resources that local authorities have, Opposition Members and local authorities would take a positive view of the opportunities that those resources and new ideas provide.

I make no apology for stressing the importance of the need for continuing public expenditure restraint. It has been the key to our enviable economic performance in recent years. Local government in Wales continues to 863 receive almost half the resources at my disposal. It must expect to play its full part in keeping public expenditure in check.

§ Mr. Llew Smith (Blaenau Gwent)

How can the Minister say that he wants public expenditure restraint, while accepting and supporting a £60 million investment in the royal yacht from public funds?

§ Mr. Hague

Some of the investments that have come into the United Kingdom, and specifically into Wales, in recent years have been partly negotiated or signed because of events held on the royal yacht. I can absolutely assure the hon. Gentleman of that. The royal yacht is worth far more than £60 million in generating new jobs and investment for the UK, and Wales has been one of the principal beneficiaries. [Laughter.] Anyone who laughs about that shows a depressing lack of imagination about the marketing of this country.

§ Mr. Gill

Does my right hon. Friend agree that the £90 million that the British Government will be called upon to pay for the new European Parliament building is 50 per cent. more than the cost of the royal yacht, and will return no benefit to the United Kingdom?

§ Mr. Hague

rose—

§ Mr. Deputy Speaker

Order. The Secretary of State should confine his remarks to the debate on the rate support grant (Wales).

§ Mr. Hague

I have no plans, Mr. Deputy Speaker, to allow any of the projects recently mentioned to be financed out of the Welsh local government settlement, as hon. Members will be delighted to hear.

§ Mr. Paul Flynn (Newport, West)

The Secretary of State mentioned the jobs that have come from the royal yacht. Has he noticed that the royal yacht has never visited Japan or Korea? Can he tell us how many jobs resulted from the destinations that it has visited? How many jobs for Wales arose from its visits to the Lesser Antilles, the Azores, the Leeward Islands, the Windward Islands, Gran Canaria, Grand Cayman, the Ivory Coast or Namibia?

§ Mr. Hague

The hon. Gentleman will be delighted to know that the royal yacht will be visiting Japan and Korea on its current tour. As his constituency is one of the principal beneficiaries of investment from Korea, he in particular should welcome our continued good relations with Korea.

Local authorities must expect to play their full part in keeping public expenditure in check. As large organisations with big budgets, local authorities have scope to prioritise services and to put in place tight, cost-effective administrative and service structures. Reorganisation has given Welsh local authorities the opportunities to do that.

I have seen the predictable press reports that always appear at this time of year speculating on cuts or meltdowns of one sort or another, including teacher 864 redundancies by a number of authorities. One authority seems to be preparing for teacher redundancies while increasing allowances for its members. I am heartened by reports that some authorities have rejected a policy of teacher redundancies, including Carmarthenshire, Denbighshire and Rhondda Cynon Taff. If some authorities can manage not to sack teachers, I question whether any authorities need to take such action.

If local authorities manage their resources prudently and in a way that their residents have a right to expect, there is no reason why they should have to cut front-line services as a result of my settlement proposals.

This morning, the hon. Member for Caerphilly (Mr. Davies) and his Front-Bench colleagues, in their role as the chief gloom-mongers of Wales, were trying to spread despondency about the local government settlement. It is time that they recognised that it is incumbent on those who criticise the level of resources provided to say where they would obtain additional resources. Opposition Members have got themselves into the ludicrous position in which they call for higher spending on a wide range of items in particular, while maintaining that they would spend no more money in total.

Such are the contortions taking place on the Opposition Benches that the hon. Gentleman has even had to resort to defending my budget. He said in the Grand Committee on 4 December that it meant "cuts", the consequences of which "would be dreadful". However, the day after the shadow Chancellor's famous speech last month, the Western Mail said of the hon. Member for Caerphilly: He said the figures were open to debate as to whether there was a cut or an increase. That is the light in which we must judge anything he says about cuts during the debate. Not only does he not agree with me; he does not even agree with himself.

If the hon. Gentleman does not agree with the settlement that I propose, let him say what settlement he proposes. The figures for each local authority which we are debating tonight are the product of two factors, and two alone: the first is the total available for local government spending, and the second is the standard spending formula by which that money is distributed. Anyone who votes against the measures tonight is implying that he is unhappy with the total, or the formula, or both.

Last night, the Opposition voted against the parallel English reports, because they said that they disagreed with the formula by which the money was shared out. Tonight, however, we are debating a Welsh settlement, before which the Welsh Local Government Association, with its clear Labour majority, specifically asked me not to change the formula.

The formula is agreed with Welsh local government, including members of the Labour party. The formula, as I have said, has been worked out by the Welsh Office and the Local Government Association, in close consultation and by agreement. It therefore cannot be the formula which troubles Opposition Members tonight, unless they are telling me that the leaders of all the Labour-controlled authorities were wrong.

The only other factor up for debate is the total sum available. That could be increased only by reducing other Welsh Office programmes, given the cross-party 865 agreement on the total Welsh budget—a budget that already assumes large and continuing reductions in the running costs of the Welsh Office and the non-departmental public bodies.

To vote to increase the settlement, while also stating that the Welsh Development Agency would be a high priority, that the money for an assembly would be found within the block, and yet that the total budget would remain the same under a Labour Government, is ludicrous double-speak. If Opposition Members vote against the settlement while maintaining that they need no compensating reductions elsewhere, people sitting at home in Wales tonight will be able to smell the hypocrisy oozing out of the No Lobby.

I am the first to acknowledge the importance of local authority services to the communities they serve, and to the people of Wales as a whole. That is reflected in my settlement proposals. A 2.3 per cent. increase in standard spending is fair in the context of the overall level of resources available and the needs of other public sector organisations, including the health service. It enables local government to maintain its services, provided that authorities are ready to set clear priorities and to pursue new opportunities to save and raise money. I commend the settlement to the House.

§ Mr. Ron Davies (Caerphilly)

I shall deal first with the central thrust of the Secretary of State's argument. I shall vote against his proposal—and encourage my right hon. and hon. Friends to do likewise—because I believe the settlement to be deeply damaging. Let me assure the Secretary of State that there is no agreement whatever on the Welsh Office budget.

It would be dishonest for me or any of my colleagues to urge local government in Wales to spend over budget in the coming financial year in the hope or expectation that an incoming Labour Government could bale them out in the middle of the financial year. I do not propose to be dishonest. That is why I and my hon. Friends have made it clear to local government that, if there is a general election that takes us into the next financial year, and local authorities have overspent, they cannot look to the Welsh Office to bale them out. That is our clear position.

The Welsh Local Government Association has made it clear that it is deeply unhappy with the settlement. I have no doubt that my right hon. and hon. Friends who represent Welsh constituencies have been in touch with their leaders and local authorities, who will have impressed on them the deep dissatisfaction of Welsh local government with the settlement.

§ Mr. Hague

The hon. Gentleman mentioned the coming year. He was quoted in the newspapers as saying that he agreed to the total Welsh Office spending plans for the next two years. That applied to total Welsh spending and to the Government's total spending plans. Was he misquoted? If not, and if he wanted to spend more on the local government settlement at any time in the next two years, would he not have to reduce other spending programmes?

§ Mr. Davies

The Secretary of State is deliberately misquoting me. I have never said that I agree with the settlement, but I recognise that it is the settlement that will apply in the next financial year.

866 After 18 years of Conservative government, if I were Secretary of State I would not expect local government to cope with the burden of cuts that the Government have imposed. I do not agree with the settlement and I do not want it. I can tell the Secretary of State directly: I believe that the settlement is inadequate and unfair to local government. I believe also that the Government are playing politics with local services and the jobs of people in the public sector. Education will bear the brunt of the cuts that the Secretary of State has put before the House this evening, which will result in the loss of 1,000 teaching jobs in Wales in the coming year. How on earth could I, or any right hon. or hon. Member who represents a Welsh constituency, agree with that package?

§ Mr. Rod Richards (Clwyd, North-West)

rose—

§ Mr. Davies

I shall not give way to the hon. Gentleman. Many of my hon. Friends wish to contribute to the debate and, if the hon. Gentleman wishes to make his own speech, no doubt he will seek to catch your eye, Mr. Deputy Speaker. If any other right hon. or hon. Members who represent Welsh constituencies wish to intervene, of course I shall consider giving way.

I make it clear to the Secretary of State that I have ambitions for local authorities to become dynamic and independent. I want them to promote economic development, conserve their environment, plan communities, educate children and care for the infirm. Year after year, the Government have undermined the ability of local councils to achieve those goals. The Government have placed duties on councils and then removed the resources needed to meet their obligations.

In the past 10 years, central Government expenditure in Wales has increased by 71 per cent. in real terms, while local government expenditure has increased by only 43 per cent. While central Government expenditure has more than kept pace with inflation, local government expenditure has failed to do so. Local government has experienced a real reduction in available resources, services have been cut, and council taxes continue to rise. It is a typical Tory trick: pay more and get less.

That is precisely what will occur under this settlement. Services throughout Wales—particularly education—will be cut. The Secretary of State is fond of quoting the Western Mail. I refer him to its report of 27 January, which forecast the loss of 750 teaching jobs. If this settlement is approved tonight, there will be an average increase of 8 per cent. in council tax across Wales—or £40 extra tax for every council tax payer in Wales.

The Secretary of State boasted this evening about how well Wales is supposedly doing under his stewardship compared with the rest of the country. I remind him of Westminster city council: it is up to its eyes in sleaze and corruption, and is one of the richest boroughs in London. If Welsh local authorities were funded on the same basis as Westminster, band D council tax in Wales would be reduced by a staggering 33 per cent. Local government has been the Government's whipping boy and, as the British people have voted consistently for Labour councils, the Government have responded by whipping those councils even harder.

At the heart of the argument between us is the performance of the British economy under the Conservatives. The simple fact is that Conservative 867 economic policy has failed and, in typical Tory fashion, the price must be paid in homelessness, crumbling schools, deteriorating health care, and divided and alienated communities. The people of Wales know that only too well. Welsh gross domestic product is 16 per cent. below the United Kingdom average, and it has shown no improvement after nearly 18 years of Tory rule. Economic failure has resulted in an inability to control the nation's finances. Our national debt is almost £400 billion—double the level when the right hon. Member for Huntingdon (Mr. Major) became Prime Minister.

Interest payments last year were more than £25 billion—more than three times the size of the total Welsh block—and the public sector borrowing requirement in 1995–96 amounted to more than £30 billion. Even in the fifth year of supposed recovery, the PSBR is still unacceptably high at £27 billion. The balance of public expenditure is out of control. Instead of investing for the future, improving infrastructure and promoting the economy, education and training, public expenditure is increasingly used to meet the social cost of failed economic policy. Education expenditure in Wales has increased by 36 per cent. in the past 10 years; social security expenditure—largely the cost of idleness enforced by Government policy—has increased by 43 per cent.

The Secretary of State claims that his priorities for the coming year are economic growth and the national health service, but he has provided no details of those additional resources nor of how they are allocated. He has not told us how his decisions will affect other programmes in the Welsh Office total spend. He has not yet published his Department's report, so how does he expect me to propose amendments to it? He and his predecessors have tried constantly to mislead the people of Wales about the true level of Government spending in Wales. They have elevated media manipulation to an art form: they have leaked, briefed and dissembled. Last December, the Secretary of State had the effrontery to announce an inquiry into the publication by the Western Mail of expenditure figures that his own office had leaked.

If we accept that the Secretary of State's stated priorities are economic development and health, will he acknowledge that local government has a vital role to play in enhancing economic growth—including projects such as LG—and in protecting the health of the Welsh people? What share of the alleged resources for economic growth and health has he given to local government? That is a straightforward question, and we are entitled to an answer. I invite the Secretary of State to intervene and provide that answer.

§ Mr. Hague

I shall intervene, but not on that point. The hon. Gentleman made an entirely unsubstantiated assertion about the source of a leak from the Welsh Office. I have established an inquiry into the matter and the report is imminent. I shall write to the hon. Gentleman about it, and to anyone else who is interested—including the hon. Member for Caernarfon (Mr. Wigley), as he is obviously curious about the findings. There is no evidence 868 for the hon. Gentleman's assertion that the information was leaked by my office. He should therefore back up his assertion or withdraw it.

§ Mr. Davies

I have no intention of doing so. The figures were prepared by the Secretary of State's Department for his use. They were not divulged to anyone else. How could anyone outside the Department have released those figures? It is a simple matter: they were the Secretary of State's figures and he had exclusive control of them. They were prepared by his office for his use. No one other than officers of his Department could have accessed those figures.

§ Mr. Hague

When the hon. Gentleman says that the figures were leaked by my office, he clearly implies my personal office. The standard of his accusations and of his debate this evening are a sad reflection on his leadership of the Labour party in Wales.

§ Mr. Davies

Is the Secretary of State saying that the figures were leaked not by his own personal office but by someone in the Welsh Office?

§ Mr. Hague

We are having an inquiry.

§ Mr. Davies

How can the Secretary of State be sure that his private office did not leak the figures if, as he now claims, the inquiry is not complete?

§ Mr. Hague

I asked the hon. Gentleman to substantiate his accusation regarding civil servants—who cannot answer for themselves in this place—and he cannot do so. That is highly irresponsible conduct, which is exactly what we have come to expect from the hon. Gentleman.

§ Mr. Davies

I am afraid that the Secretary of State's performance is woeful. The figures were prepared by his Department for subsequent publication. They were available only to civil servants and politicians in his Department—nobody else could have accessed them or leaked them. The Secretary of State is responsible for his Ministers, political advisers, media officers and other civil servants in his Department. Someone in his office leaked the information, deliberately and maliciously, to the Western Mail.

§ Mr. Richards

On a point of order, Mr. Deputy Speaker. I seek guidance on what the hon. Member for Caerphilly (Mr. Davies) has been saying for some time. Is it in order for an hon. Member—

§ Mr. Rhodri Morgan (Cardiff, West)

This is a foolish point of order. Sit down.

§ Mr. Deputy Speaker

Order. I am trying to listen to the hon. Member's point of order.

§ Mr. Richards

The hon. Gentleman's body temperature is higher than his IQ—on the centigrade scale.

869 Is it in order, Mr. Deputy Speaker, for an hon. Member to make unsubstantiated accusations in the House against officers of the Crown? [HON. MEMBERS: "Sit down and do not be silly."] I recall Madam Speaker saying that she deprecated attacks on civil servants by hon. Members.

§ Mr. Deputy Speaker

Hon. Members are responsible for their own speeches.

§ Mr. Davies

I invited the Secretary of State to give a straightforward answer to my question. What share of the alleged additional resources for economic growth or health has he given to local government? If he cannot answer that question now—I realise that local government finance is complex, and perhaps he has not had time to master it—will he write to me with that information?

§ Mr. Hague

I am happy to answer the hon. Gentleman's questions all evening. It amazes me that he is so resistant to more Welsh Question Times in the Grand Committee, given that he is so keen to ask questions in the House.

The increased resources for economic development and for health that I announced are channelled through the health authorities, the Welsh Development Agency and the Development Board for Rural Wales. Local authorities often work in partnership with those authorities and agencies, so there are important spin-offs for local government. The resources are not specifically channelled through local authorities. That is the answer to the hon. Gentleman's question, and I am perfectly happy to answer any other questions that he may have about the Welsh Office budget and local authority finance, but that may keep us here for a long time.

§ Mr. Davies

I am grateful to the Secretary of State, because that is precisely the answer that I knew he would give. His Department fails to acknowledge the crucial strategic role that the Welsh Office and local government could play together in tackling the economic and interlocking problems of our communities, such as unemployment and idleness, under-achievement, poor housing, poor environment, poor standards of public behaviour and poor health. It is the Welsh Office's failure to understand that and to work with local authorities that has caused so much resentment and frustration in Welsh local government under his regime.

We need a coherent, strategic partnership, but that is the last thing that we will get from a Government who are obsessed with short-termism and media manipulation.

§ Mr. Sweeney

Will the hon. Gentleman give way?

§ Mr. Davies

No, I have given way to the Secretary of State and I want to make progress.

§ Mr. Sweeney

rose—

§ Mr. Davies

I shall give way to the hon. Gentleman in a little while.

The Secretary of State has just claimed that total standard spending has increased by 2.3 per cent., but that is at best misleading. He knows full well that the true increase is only 1.6 per cent., which is below the level required to keep in line with inflation. He tried that trick 870 in the Welsh Grand Committee last year. When challenged by my hon. Friend the Member for Bridgend (Mr. Griffiths), he said: It is no good taking out this or that to make the figures look different. The total figure is rising by 2.6 per cent."—[Official Report, Welsh Grand Committee, 4 December 1996; c. 14.] The Under-Secretary of State for Wales, the hon. Member for Cardiff, North (Mr. Jones), in his letter to the chair of the Welsh Local Government Association on 15 January 1997, admitted that the true increase is only 1.6 per cent. We have the Secretary of State's version—a 2.6 per cent. increase—and his hon. Friend's version, a 1.6 per cent. increase. Which of those two figures represents either the true position or the Government's position?

We all know that a host of adjustments will have to be made before the truth is uncovered. Expenditure provision in the settlement is insufficient, not only to meet pay and price inflation, but to enable local authorities to maintain services at the current level in the face of rising demand, especially in schools, community care and the fire service.

The Secretary of State also claimed that aggregate external finance has increased by £64.1 million. Does he agree that, if both last year's damping schemes are included, external finance for local authorities in Wales increased by only £43 million, which is less than required to keep pace with inflation?

The Secretary of State's decisions will mean yet further council tax increases for the people of Wales. The increases will be 8 per cent. on average, with many Welsh authorities facing increases of nearly double that figure. In Ceredigion, the increase is 9 per cent., which is £49; in Torfaen it is 15 per cent., which is £65; in Merthyr it is 15 per cent., which is more than £74; and in Denbighshire it is more than 16 per cent., which is £80.

Those council tax figures are part of a deliberate, long-term plan to increase the level of council tax in Wales, and there is no use the Secretary of State denying it. In a letter dated 7 November 1995 to my right hon. and learned Friend the Member for Aberavon (Mr. Morris), the Secretary of State confirmed that that is his long-term plan. His very words were: I believe that over time local authorities in Wales should raise a higher proportion of their income from council tax. The 11 per cent. increase is the result of this approach. We should have no illusions about this settlement. When council taxes go up, it is because the Welsh Office and the Treasury intend them to go up. The 8 per cent. increase in Wales far exceeds the 6 per cent. increase for England that the Government announced yesterday. Further evidence is provided by the fact that revenue support grant now accounts for 54 per cent. of local government spending, whereas 10 years ago it was 64 per cent.—10 per cent. more.

§ Mr. Rowlands

My hon. Friend returns to the point with which we began the debate, about the balance between central and local government expenditure and taxation. A marginal change in central Government support to local authorities leads to a disproportionate increase in council taxes. Any increase in local taxation is unfair, especially to poorer communities such as he and I represent. The burden of taxation is heavier on poorer communities.

§ Mr. Davies

My hon. Friend is right. He represents Merthyr Tydfil and Rhymney, which includes part of my 871 local authority area of Caerphilly. That local authority faces horrendous consequences as a result of this settlement. It is grappling with budget cuts of £8 million, as are other local authorities. The local authority of my hon. Friend the Member for Blaenau Gwent (Mr. Smith) is one of the smallest, but it faces cuts of £6 million or £7 million in its annual budget.

The consequences must rest on the Government's shoulders. There will be real and severe cuts across the whole range of local government services, especially services that are trying to meet the cost of economic and social failure. The settlement will affect local authorities that are trying to invest in and improve their communities to generate wealth and job opportunities, and to build for the future. The Government are so short-sighted that they do not understand the role that local authorities play, and they will not work in partnership with them. It is all part of the Government's strategy to make council tax payers pay more. The 1p cut in the standard rate of income tax in last year's Budget will be more than cancelled out by council tax increases resulting directly from this settlement.

In addition, the capital settlement has been cut by £66 million. That money is needed for investment.

§ Mr. Sweeney

Will the hon. Gentleman give way?

§ Mr. Davies

I shall give way in a moment.

The capital settlement has been cut by 13 per cent. in cash terms, and by more than 15 per cent. in real terms. Is that not typical of the Government? They are irredeemably short-termist, and look only as far as the next election: they do not even have the courage to face that election.

§ Mr. Sweeney

I am grateful to the hon. Gentleman. He said some time ago that he would give way in a moment; then he said that he would give way in a little while; then he said that he would give way in a moment. Since then, he has responded to two other interventions.

I wanted to take up a point in the hon. Gentleman's speech—I hope that he can still recall it—when he contrasted the increase in education spending with the increase in social security spending, implying that the increase in social security spending had been excessive. What cuts in social security does he propose in order to increase education funding? If the hon. Gentleman's party were to take office, and if the social chapter were to be introduced, how much more would he have to spend on social security—or cut benefits?

§ Mr. Davies

I shall give the hon. Gentleman a direct answer. In Wales, some 30,000 people under 25 are unemployed. I want them to return to productive work. I want them to have the self-respect and discipline that comes from the opportunity to work for a living—an opportunity that the hon. Gentleman and the Government he supports have denied to generations of young people 872 in Wales. When we provide young people with that opportunity—with the ability to be self-sufficient, and to work for themselves—the social security bill will fall.

§ The Parliamentary Under-Secretary of State for Wales (Mr. Gwilym Jones)

Will the hon. Gentleman give way?

§ Mr. Davies

No, I will not. Many of my colleagues want to speak. The Minister will be able to speak—he will wind up the debate—and I want to finish my own speech so that the debate can continue.

The reality of the settlement is that total standard spending has been cut in real terms, Welsh Office support has been cut in real terms, and the capital spending programme has been slashed in both real and cash terms. Not only are resources being reduced; responsibilities are being increased. How can the Secretary of State expect local authorities to meet the cost of inflation in pay and prices? Will he confirm that a 3 per cent. increase in teachers' pay—mentioned in leaks in Sunday's newspapers—will cost Welsh local authorities nearly £20 million extra next year, and that the settlement makes inadequate provision for that increase?

Does the Secretary of State acknowledge that the expenditure forecasting group, in which both his officials and local government officials took part, estimated that central Government initiatives, through legislation and policy, will require extra spending of £129 million next year—on top of inflation? Does that not mean that, in real terms, the settlement means a cut of 3 per cent., or even more, in the budgets of Welsh local authorities next year?

Will the right hon. Gentleman confirm that his vacillation, and that of his Department, over the technical adjustment of the notional amounts in the capping rules for the nursery voucher scheme has bedevilled this year's settlement? Why does he not accept that nursery vouchers are wasteful, inefficient and particularly unsuited to Wales, as evidenced by the overwhelming number of representations against the scheme made to him and the single, solitary letter in support?

Does the right hon. Gentleman acknowledge that the new local authorities have had to make substantial savings in the current year to meet the continuing cost of reorganisation, and that they are having to deplete their reserves to maintain existing services—if they can? He should recognise that, and he should admit that this is a dreadful capital and revenue settlement. No doubt hon. Members will wish to illustrate the effect that it will have on their local authorities. It is clear that the Secretary of State does not realise that the financial base of the new local authorities in Wales is already precarious, and it will be weakened further by this harsh settlement.

§ Mr. Richards

Will the hon. Gentleman give way?

§ Mr. Davies

No, I will not.

It is time for the Secretary of State to admit that his decision will impose an unmanageable outcome for local government, and to acknowledge that that is bound to result in damage to our local communities. It is time for him to accept that his policies are flawed and lacking in coherence. It is time for him to accept that his budget decisions betray a lack of understanding of, or sympathy for, the needs of the people of Wales.

873 The settlement reflects the failure of Conservative policies, and itself fails to provide a platform on which to build for the future. Since 1979, local government in Wales has struggled to serve its communities well, despite the handicaps inflicted on it by successive Welsh Office Ministers. Welsh councils have had enough of this tired, incompetent, feckless, dishonest Government. Like the rest of the country, however, they will have to wait for the general election and the next Labour Government. The sooner that comes, the sooner we can start the long climb back to ensure honesty and decency in the provision of public services in Wales.

§ Sir Wyn Roberts (Conwy)

I am glad to have the opportunity to comment on the settlement, but I do not know whether to be reassured or perturbed by the fact that the hon. Member for Caerphilly (Mr. Davies) is prepared to accept so much with which he disagrees. It makes me wonder what else he accepts, but disagrees with.

The settlement is, once again, constricted—as it should be, if we are to keep inflation under control and the overall budget deficit within manageable proportions. It is indubitable that there are public pressures to let public spending rip, but we all know that would be wrong, and, if it happened, it would end in tears of contrition.

One of my local councils, Gwynedd, has written to me, commenting—very sensibly, in my view—on the position, as seen by its finance and policy committee. The committee estimated its needs at nearly £120 million next year, if services of the present quality are to be provided; but it will be capped at £115.7 million. Its grant from central Government is £95.3 million—which is not ungenerous, at 82 per cent. Interestingly, the council does not propose to spend to the capping limit, because, it says, that would mean a council tax increase of 11.3 per cent. It is a good council, in the sense that it does not regard the capping limit as a target.

With commendable restraint, the council has expressed a wish to keep its increase to what it thinks will be the Welsh average—between 8 and 9 per cent. That, however, will mean alarming reductions in expenditure, which the council spells out in its letter. It will be interesting to see what final conclusions the full council reaches on 6 March, but one thing is clear: the severity of the cuts that it may impose will depend greatly on the extent to which it is prepared to raise money locally, and, of course, on what it believes it can raise locally—what local people can afford.

With the present Parliament coming to an end and a general election looming, I am more concerned about the future of local government finance than with the past. In particular, I am concerned about the Opposition's proposals to do away with capping and return local business rates to local control. In my view, both moves would be retrograde. One thing is clear from the deliberations of Gwynedd council, and its decision not to spend up to the capping limit: it, at least, has got the message about the need to restrain spending, and I commend it for that. The abolition of the cap, as proposed by Labour's document "Renewing Democracy, Rebuilding Communities"—published in September 1995 874 and confirmed in yesterday's debate by the hon. Member for Holborn and St. Pancras (Mr. Dobson)—would send local authorities a very different and destructive message.

§ Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

The right hon. Gentleman has mentioned Gwynedd council twice. Perhaps he should have told the House that the council had to raise its tax by 25 per cent. last year. To impose a similar tax this year would be totally unrealistic. It could not be paid anyway, could it?

§ Sir Wyn Roberts

The council managed 25 per cent. last year, but interestingly it has decided that it could not raise the rate by the figure that might have been suggested to it, and that it would rather keep the rate at the Welsh average. That shows responsibility on its part.

I am also critical of the proposal of the hon. Member for Caerphilly to return the business rate to local control, because we all surely remember what happened under the last Labour Government when local councils controlled the rate. Businesses were caned and destroyed by high rates. They were easy to hit, because owners had few votes compared with domestic ratepayers. I hope that the Labour party has grown up even since 1995—I refer again to its document. I shall listen carefully to the winding-up speech of the hon. Member for Bridgend (Mr. Griffiths) for, I hope, a denial of Labour's intention to abolish the national uniform business rate, the burden of which the Government have alleviated in last November's Budget, certainly in relation to small businesses.

The Labour party also proposes, I understand, to end compulsory competitive tendering. That, too, is regressive. The Government are only now beginning to succeed in persuading authorities of the undoubted cost benefits to their consumers of acting in an enabling rather than a direct-provider role. It would be a shame if we were to take a step backwards to the position where, frankly, services were provided primarily for the benefit of local authority trade union employees, rather than the ratepayers who pay for them.

I assure Opposition Members that I am not alone in not wishing for a return to that position, which, I hate to remind them, finally led to the winter of discontent, when there were mountains of uncollected rubbish and even unburied dead, and the last Labour Government fell out with trade union leaders, who refused to listen to them and to their pleas for restraint.

I have been reading Lord Callaghan's "Time and Chance", which contains a first-class account of what I have been talking about. We have always maintained that capital receipts from the sale of council houses and other property should for the most part be used to reduce existing debt, thereby reducing the debt interest burden on ratepayers, but the Labour party believes that those receipts should be spent.

I have read recently that the Labour party is adhering to that policy. If so, it must explain, if it can—I do not believe that it can—how it can allow that without failing to reduce the nation's debt burden as a whole. Welsh local authorities' outstanding loan debts on housing and non-housing services run to hundreds of millions of pounds, as the table on page 17 of "The Local Government Finance Report (Wales) 1997–98" shows.

It is clear that, whatever local authorities' financial problems may be, they will be as nothing compared with the problems should the Labour party gain power. If the 875 Opposition's devolution plans are approved by Parliament, there will be even less money for local government and less power too, as the assembly arrogates to itself more and more of the powers now exercised at local level. That will certainly happen.

It is now of course fashionable to malign the quangos, the non-departmental public bodies, but we should never forget that they were largely the invention of the Labour party, which believed that local authorities were inadequate to perform the nationwide tasks that needed to be performed in different sectors. Tourism and economic and industrial development are good examples.

Latterly, the Labour party seems to have repented and reverted to supporting the local authorities that it controls, but I do not believe for a moment that its repentance will last for long, once it has its party commissars and apparatchiks on the NDPBs.

§ Mr. Richards

My right hon. Friend has expressed his concern about the Labour party's proposal to create an assembly in Cardiff. Is he doubly concerned about the effect of an assembly in Cardiff on his constituents in north Wales? Is he not alarmed by the statement of the hon. Member for Caerphilly (Mr. Davies), who said that the assembly would not have tax-raising powers initially, which implies that the Labour party's plans are similar to those in Scotland, in that a Welsh assembly would have tax-raising powers?

§ Sir Wyn Roberts

All parts of north Wales and mid-Wales fear that, because of the sparsity of their populations, they would be dominated by an assembly in south Wales, representing as it inevitably would the bulk of the population, which is located in the south.

On my hon. Friend's second point, I do not think that we have heard the end of the Labour party's plans for an assembly, and I would not be surprised if, even initially, it had tax-raising powers. I am sure that, if there is a Scottish Parliament with tax-raising powers, there will be a cry from the assembly men in Wales that they should have a similar power.

§ Mr. Ron Davies

I do not know why the right hon. Gentleman keeps raising this argument. We have made it absolutely clear that the Labour party has no proposals to give tax-raising powers to the assembly.

§ Sir Wyn Roberts

The hon. Gentleman assumes that he and his party can carry any proposal for an assembly through the House without change. Again, I ask him to go back to our debates in the 1970s to find out just how radical the proposed changes were—they were carried in the House, resulting in the defeat of the then Government, so he must not assume that he can dispose whatever he proposes. It is not up to him; it is up to Parliament to dispose.

§ Mr. Davies

I am not assuming anything. All I propose is to put to the people of Wales the question whether they should have their own assembly. If they vote yes, I am sure that the House will wish to accommodate that wish.

§ Mr. Deputy Speaker

Order. Passing reference to an assembly is one thing, but talking about it in detail is another.

§ Sir Wyn Roberts

I accept your guidance, of course, Mr. Deputy Speaker, but the hon. Member for Caerphilly simplifies a complex issue, as he will find it to be.

876 I was saying that the great danger is that NDPBs, like the Welsh tourist board and the Welsh Development Agency, will do little of value and substance, except pander to the whims of the their political masters.

On the settlement, I have read the police authorities' representations. The reduction in their capital expenditure is compensated for by additional money for extra officers, plus an increase in revenue—not far short, it seems to me, of what they wanted. Their strongest plea is to be included in the formula working group. I hope that my right hon. Friend the Secretary of State for Wales can accommodate them in that wish. Overall, I agree with him that his proposals provide local authorities with a fair level of funding in 1997–98 given the overall level of resources available and other spending needs."—[Official Report, 28 January 1997; Vol. 289, c. 159.] I shall be happy to support him in the Lobby.

§ Mr. Allan Rogers (Rhondda)

I have never heard so many "opposition" speeches by Conservative Members. One would think that we were in government, as we shortly shall be, and that the Conservatives were in opposition. The Secretary of State and the right hon. Member for Conwy (Sir W. Roberts) were more concerned with Labour proposals than with their own. The right hon. Member for Conwy introduced the issue of a Welsh assembly. It is an interesting subject and I am sure that there will be many interesting debates on it, but enough of that for this evening.

I was disturbed by the Secretary of State's speech, because only in his last sentences did he talk about the services that are provided by local government. I accept that, in the early part of his speech, it was incumbent on him to outline his proposals and the finance related to them. However, I wish that he had said more about services and about how the money is to be applied to them.

Local government is about providing services to people, whether they live in deprived or in wealthy communities. It is about the direct services that people need. Instead of indulging in yah-boo tactics, we should get down to talking about our communities and the services that they need. I should like to outline the position as it is seen by my local authority, Rhondda Cynon Taff, which covers the constituencies of two of my hon. Friends as well as mine. I shall look at one aspect of local government to highlight what we are debating.

The Government's proposals will have a substantial effect on Rhondda Cynon Taff council. There is no point in the Secretary of State saying, "It is up to the councils to make the cuts," because the reality is that there will be cuts. In my communities they will lead to the loss of 100 teaching jobs, and about 120 jobs will be lost in social services. Social services jobs have to be translated into issues such as the closure of a sheltered employment facility and a children's resource centre and less assistance to the disabled and disadvantaged who are living at home. Those are just some of the effects of the cuts.

The housing service will be forced to reduce support for the homeless. There will be a reduction in child care provision. The peripatetic music service, for example, and other services that should benefit our children will be cut, and that will make the schools much poorer. 877 In discretionary areas, the adult education service will be almost destroyed, as will discretionary awards for students. That will affect mature students who perhaps take advantage of other courses and then want to go to university or college. Figures can be bandied about for ever, but they mean that there will be cuts in services, often affecting the most vulnerable people.

In the second part of my speech, I shall look at the service that is provided for those with learning and disability problems. It is provided jointly by social services, health authorities and local NHS trusts working, in many cases, with voluntary and independent providers such as Mencap. Such services are laid on local authorities by the Government and, in the past 18 years, the Government have put extra duties on local government and have an obligation to fund them. The Government say that they can be paid for from local resources, but they cannot.

The transfer of some local government functions to central Government has been mentioned. There is an argument for that when central Government continually place obligations on local authorities, fund them initially, subsume the funding into the general rate support grant and then squeeze it off.

Disadvantaged people come within the framework of five pieces of legislation: the National Assistance Act 1948; the National Health Service and Community Care Act 1990; the Carers (Recognition and Services) Act 1995; the Chronically Sick and Disabled Act 1970 and the Disabled Persons (Services, Consultation and Representation) Act 1986. Those Acts place obligations on local authorities and they cover the areas that will have to be cut because of central Government settlements such as this. The Mental Health Acts of 1983 and 1985 are also relevant to the provision of services for the unfortunate members of our community.

Beyond the specific legislation passed by this institution, the Welsh Office has laid down guidelines. For example, in 1983 it set out key principles for those with learning difficulties and said that disabled people and those with problems have the right to live an ordinary pattern of life within the community. That is one of the Secretary of State's guiding principles. The guidelines stated that such people had the right to be treated as individuals and to have individual assessment of needs, and added that provision should be made to fulfil those needs.

The 1983 guidance was updated just two years ago, in 1994, by the Welsh Office document entitled "Welsh Mental Handicap Strategy". It reiterated the key principles and stated that there had to be an individual plan for everyone and that a range of care and support should be provided. It stated that there should be help to obtain real jobs for most adults and that there should be a range of accommodation to include provision for the resettlement of people who were living inappropriately in mental hospitals. Such provision will be savagely cut if the provision of accommodation for the whole community is cut.

The people I have mentioned depend on support to live in the community. People who have been incarcerated in mental hospitals, sometimes for many years, cannot be allowed to drift into the community, let loose without proper support. This Government and previous Governments have placed responsibility for that support 878 on local authorities. If they want local authorities to do the job, they should provide resources. Not just this Government, but every Government have to do that.

There is no point in treating local authorities like political footballs. If we are to have a proper system of devolved government, we must allocate to it the resources that are needed to do the job that Parliament has asked it to do. The Secretary of State's proposals are not good enough to allow local authorities to do that. People with learning and disability problems have the right to independence, dignity and the same quality of life as those who have full use of facilities and faculties and are fully able to participate in society. To help them, we must harness the resources not only of local authorities but of other institutions.

We should set up community support teams consisting of social workers, community nurses, psychiatrists, psychologists and occupational therapists. In addition, we must provide proper medical care, including that which people with learning and disability problems require over and above that of the ordinary members of society. Those are the obligations and complexities of providing for those whom we have said should be in the care and responsibility of local authorities. If the Government cannot will that money to local authorities to carry out those functions, they are failing in their duty and in their responsibility to the people of Wales.

§ Mr. Walter Sweeney (Vale of Glamorgan)

I should like to pay tribute to my right hon. Friend the Secretary of State for once again securing a generous settlement for Wales, compared with that for England. The aggregate external finance that he has announced represents a 2.6 per cent. increase over last year, and it is about 1 per cent. more than the increase announced for England.

§ Mr. Donald Anderson

With that generous settlement, how many jobs does the hon. Gentleman expect will be lost in his local authority?

§ Mr. Sweeney

That will be a matter for the local authority to determine, because my right hon. Friend has left with local authorities the discretion, provided that they do not exceed capping levels, to determine how much council tax people will pay. That discretion will apply in Vale of Glamorgan as it will across Wales. I should expect Vale of Glamorgan to look for ways of getting better value for money and of providing better services for a given amount, and not, for example, to waste money on titivating the reception area of its civic offices, on which an enormous amount appears to have been spent.

When council tax demands are sent, my right hon. Friend and all Conservative Members will no doubt be castigated for not giving enough money to Vale of Glamorgan. Let the local authority put its house in order. If it manages to run Vale of Glamorgan responsibly, I am optimistic that service and job cuts, to which the hon. Member for Swansea, East (Mr. Anderson) has alluded, will not have to be made.

Aggregate external finance for Wales amounts to £880 per man, woman and child in Wales, which is £150 more per head than in England. AEF represents 88 per cent. of total standard spending, which on any reckoning is an extremely high percentage. I shall not be at all surprised 879 if, when Labour-controlled local authorities send out their council tax demands in a few weeks, they attempt to blame the Government for the increases that they will undoubtedly impose; but local authorities will of course be free to set the council tax of their choice.

§ Mr. Llwyd

Subject to capping.

§ Mr. Sweeney

Subject, of course, to capping. It is interesting to note that Opposition Members do not seem to like capping. Perhaps that is not surprising, as we all know that Labour-controlled Governments, just like Labour-controlled authorities, tend to act irresponsibly when spending is involved. In the past few days, we have received assurances from some Labour Members, who are not in the Chamber for this debate, that Labour will not attempt to increase spending in the next two years. However, the tone of Opposition Members' speeches today suggests that they assume that central Government are not providing enough money for local authorities. The clear implication is that a Labour Government would provide more.

I agree with my hon. Friend the Member for Clwyd, North-West (Mr. Richards) that we need answers from the hon. Member for Caerphilly (Mr. Davies). We need to know how much extra money he would spend on behalf of a Labour Government this year and in the year after; but, of course, he has said nothing. It is much easier to stand up and rant at the Government than it is to set out one's own policies, for which one could be blamed.

My right hon. Friend the Member for Conwy (Sir W. Roberts) has rightly stressed that Government spending must be kept under control to maintain a strong economy. Indeed, if we are to maintain the sustained growth, low inflation and low interest rates of which the Government are rightly proud, we must reduce borrowing and continue the Conservative policy of lowering income and capital taxes. It is therefore important for the Government to encourage restraint in local government spending. Against that background, the Secretary of State deserves to be congratulated on his success, in what must have been extremely tough negotiations with the Treasury and with his Cabinet colleagues, in driving a hard bargain on behalf of the people of Wales.

In the longer term, I believe that it would be right for a larger proportion of the cost of local government to be borne locally. That would increase accountability and induce a greater sense of financial responsibility, even among Labour councillors not renowned for their careful housekeeping. However, under the current system, it is plainly an important part of the Secretary of State's role to battle for the largest possible share of the taxation cake for the people of Wales. He deserves the thanks of all people living in Wales for screwing an extra £150 per head out of central Government taxes compared with what people in England received.

I am thankful that more hon. Members representing English constituencies are not in the Chamber for this debate, because, were they to realise fully the effectiveness of my right hon. Friend in those Cabinet discussions, I fear that they would be up in arms and would attempt to cut the amounts provided to Wales.

§ Sir Wyn Roberts

Is my hon. Friend aware—I think that I am right in saying this—that the abolition of 880 capping might result, at a conservative estimate, in the spending of an additional £1.5 billion? Does he agree that that would be very inflationary?

§ Mr. Sweeney

My right hon. Friend makes a very good point. Opposition-controlled local authorities clearly would like to have us believe that money spent by local government is somehow different from that spent by central Government and that it should not appear in public borrowing figures. Time and again, we hear the argument, "Allow us to spend all our receipts from council house sales," notwithstanding the fact that the authorities borrowed the money to build those houses and have not paid it back.

You, Mr. Deputy Speaker, have already ruled that this is not the occasion for a full-scale debate on Labour's proposals for devolution in Wales. However, it would be wrong for me to conclude my remarks without pointing out that, if we did not have the strong voice that we have in our Secretary of State, we would not have secured this settlement for Wales. If we were to have the assembly proposed by the Labour party, the danger would be either that we would lose our Secretary of State entirely, or that he would be emasculated and no longer able to speak in the interests of the people of Wales with the strong voice that he now possesses.

I can see you, Mr. Deputy Speaker, looking at me as if to say—

§ Mr. Llwyd

"Shut up".

§ Mr. Sweeney

Just so. [Laughter.] I shall therefore finish on this note: let us say no to devolution; let us keep our Secretary of State for Wales; and let us look forward to generous and effective leadership in future.

§ Mr. Llew Smith (Blaenau Gwent)

I was brought up to believe—my socialism reflects it—that investment should go where need is greatest, and I believe that that should be reflected in the settlement. If such an element of fairness were introduced into the settlement, my constituency of Blaenau Gwent would be one of the greatest recipients. Whatever measuring rod one uses to measure need and poverty, Blaenau Gwent almost certainly would be near the head of the league.

Just last week, the Government's statistical office accepted that Blaenau Gwent has the lowest levels of